Consolidating debt home equity line
Home equity loans can be used to consolidate account balances from multiple credit cards or installment loans into a single loan, while offering the added benefit of consolidating multiple payments into a single monthly payment.
Using home equity for debt consolidation can be beneficial if the repayment period for paying off the home equity loan is shorter than it would be for your existing debts, or, if the interest paid over the repayment period is less than what you would pay without consolidating your debt.
Both types of loans come with pros and cons: Home equity loans tend to have much lower interest rates than, say, credit cards.
A ,000 credit card debt at 16% interest costs the borrower more than ,000 a year.
If you transfer that balance to a home equity loan, you suddenly have a ,000 credit card with nothing on it.
So even though you technically owe the same amount of money, your credit utilization has shrunk.
Moving your outstanding credit balances to one low rate payment could save you money and time—making it easier to manage your money.
Plus, you might find that while you're always making payments, your debt isn't actually going down.If you know you're not going to pay off your credit card balance every month, take a look at a low interest credit card option to help keep interest costs down.